Markets & Finance

Stocks Finish with Strong Gains

June 06, 2004

Stocks romped ahead on Monday to end solidly higher, led by technology issues, as a decline in oil prices eased inflation fears and some positive corporate news stoked investor interest in buying equities.

Looking ahead, most of investor attention on Tuesday will be focused on word from Federal Research Chairman Alan Greenspan who is expected to speak at the International Monetary Conference. According to Informa Global Markets, an economics research firm, investors will be looking for "assurances on the tightening cycle," or for an indication that the central bank will not raise interest rates too steeply.

Earnings news will be light with ABM Industries (ABM), a provider of janitorial and other facilities services, among the few companies reporting.

There is little economic data due out on Tuesday. But on Wednesday, investors will get a read on wholesale inventories for April, which are expected to show a 0.6% increase, the same increase as in the previous month. Wholesale sales for the month, however, are expected to decline 0.2%, vs. a 2.7% increase in the previous month.

On Monday, the NYSE observed two minutes of silence after the opening bell in memory of former U.S. President Ronald Reagan. Reagan died on Saturday after a long struggle with Alzheimer's disease. The NYSE, Nasdaq Stock Market, and American Stock Exchange will also close Friday in observance a national day of mourning for Reagan.

Among the stocks in the news on Monday, MBNA (KRB), the credit card issuer, was described as an attractive takeover target for financial services giant American Express (AXP) in a report Sunday in Barron's, a financial weekly.

Boeing (BA) said it sees orders for its long range and fuel-efficient 7E7 aircraft reaching 200 this year.

McDonald's (MCD), the world's largest fast-food concern, posted a 7.4% increase in May sales at stores open at least one year. But the company also said sales growth slowed from recent months because of tougher year-over-year comparisons.

Also in equities news, biopharma outfit ImClone (IMCL) said its lead oncology drug Erbitux was related to increased survivability rates in some cancer patients.

On the energy front, oil futures were trading at $37.98 a barrel in New York after a decision on Thursday by the Organization of Petroleum Exporting Countries to increase production. Before that decision, oil had been trading higher than $40 a barrel.

Stocks also owed part of their positive momentum from the employment report for May, released Friday morning, which showed that the economy added a greater-than expected 248,000 nonfarm jobs on the month.

Treasury Market

Treasuries ended mostly firmer after reports of a threat by Al Qaeda, the international terrorist group, to attack a U.S. airliner. Informa Global Markets says position adjustments ahead of Greenspan's speech on Tuesday and looming supply were also reasons from the uptick.

The Bond Market Association has recommended a Friday close for the bond market in observance of the Reagan ceremonies, reports Action Economics.

World Markets

European stock markets ended higher on Monday. London's Financial Times-Stock Exchange 100 index gained 37.20 points, or 0.84%, to 4,491.60 as Brent crude oil futures fell 51 cents to $35.16 per barrel following last week's OPEC agreement to increase output. Marks & Spencer was higher on speculation Philip Green may come back with a new, improved all-cash takeover bid. Barclays was also higher as it was also subject of M&A talk.

In Paris, the CAC 40 added 23.36 points, or 0.63%, to 3,722.23 as France Telecom, Axa, and Alcatel were higher. Air France and EADS were lower on negative news from the aerospace sector after EasyJet guided down profit forecasts for this year on the back of higher fuel prices.

Germany's DAX index jumped 55.88 points, or 1.41%, trading at 4,017.81 in carryover from Friday's rally, aided by lower oil prices and report that VDMA doubled its output forecast for orders rise. Deutsche Post was higher after announced announced an IPO price range of EUR 31.5 to EUR 36.5 for Postbank. Lufthansa was also up up after announcing ticket surcharges due to rising oil prices and plans to raise long-haul flights by 3% from July 1.

Asian stock markets ended with gains on Friday's strong finish in U.S. markets. Japan's Nikkei 225 index rose 311.87 points, or 2.80%, to 11,439.92, boosted by an upswing on Wall Street on Friday on lower oil prices and optimism over the domestic economy and earnings. U.S. NYMEX crude fell six cents to $38.43 a barrel in Asia trade but traders say downside was limited given worries about tight U.S. gasoline supplies and security fears. In the local market, banks, insurers and tech names trended higher on bullish outlook, with Canon shares extending gains after it said on Friday it would likely beat its earnings forecast for the quarter to June by more than 20%. Shares of UFJ Holdings rose after Japanese media reported on Sunday that it had begun informal talks with the state rescue body to revive the fortunes of several of UFJ's big borrowers.

Hong Kong, the Hang Seng index gained 204.21 points, or 2.53%, to finish at 12,326.685. In Hong Kong, the Hang Seng index was up 2.6% to 12335.67. Taiwan stocks rose on the back of gains in index heavyweights such as Taiwan Semiconductor and United Microelectronics, which rose following gains in U.S. peers on Friday.